Correlation Between Sunlands Technology and New Oriental

Can any of the company-specific risk be diversified away by investing in both Sunlands Technology and New Oriental at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sunlands Technology and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sunlands Technology Group and New Oriental Education, you can compare the effects of market volatilities on Sunlands Technology and New Oriental and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sunlands Technology with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunlands Technology and New Oriental.

Diversification Opportunities for Sunlands Technology and New Oriental

-0.34

Correlation Coefficient

Sunlands Technology  New Oriental

Very good diversification

The 3 months correlation between Sunlands and New is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sunlands Technology Group and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education and Sunlands Technology is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sunlands Technology Group are associated (or correlated) with New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of Sunlands Technology i.e., Sunlands Technology and New Oriental go up and down completely randomly.

Pair Corralation between Sunlands Technology and New Oriental

Considering the 90-day investment horizon Sunlands Technology Group is expected to generate 1.2 times more return on investment than New Oriental. However, Sunlands Technology is 1.2 times more volatile than New Oriental Education. It trades about 0.02 of its potential returns per unit of risk. New Oriental Education is currently generating about -0.09 per unit of risk. If you would invest  580.00  in Sunlands Technology Group on December 28, 2024 and sell it today you would lose (12.00) from holding Sunlands Technology Group or give up 2.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sunlands Technology Group  vs.  New Oriental Education

Sunlands Technology

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sunlands Technology Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sunlands Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

New Oriental Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days New Oriental Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sunlands Technology and New Oriental

The main advantage of trading using opposite Sunlands Technology and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunlands Technology position performs unexpectedly, New Oriental can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in New Oriental will offset losses from the drop in New Oriental's long position.

The idea behind Sunlands Technology Group and New Oriental Education pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.